One Equity Partners bought and merged two businesses to create what it believes will be a front-runner in wood processing equipment, aftermarket parts and consumables – a segment ripe for growth with lumber demand high and ESG top of mind.
The New York private equity firm completed the joint acquisitions of USNR and Wood Fiber Group to create a combined company with projected 2021 revenues greater than $500 million.
“This is a perfect example of [an] OEP type of deal – we try and find good industries that may be niche and can benefit from consolidation,” said James JB Cherry, senior managing director at OEP. “We buy companies and transform them by finding a complementary business in the space and combining them.”
OEP has had its eyes on this area for some time, confident that secular tailwinds will drive growth at the platform during what it expects will be a typical five-year hold period.
“It is great that we were able to do this one right out of the gate,” Cherry said. OEP will never try to time a cycle, but by investing “behind durable themes and [a] differentiated platform, there will be lots of opportunities to create to value.”
One important tailwind? “Demand for lumber is only going to continue to be strong over the next few years,” the investor said. “With high-home prices, lumber will be needed for not only new homes, but remodels of existing homes. And there is also more demand for lumber in non-residential buildings.”
Also in play is an ESG component – one of the most talked about topics in private markets today with more concern about the environment now than ever before.
“Wood products [are] increasingly favored as a building product,” he said. That ESG component is also relevant with the corporation of mass timber products, and that “goes hand in hand with the growing demand for ESG and earth friendly investments and products.”
USNR is a supplier of equipment and technologies for the wood processing industry. It operates four large manufacturing plants in the United States, Canada and Sweden and is best known around the world for providing end-to-end solutions for sawmills and planer mills.
Wood Fiber Group is a manufacturer and supplier of sawmill consumables, parts and services. It was formed in January 2018 with the merger of Simonds International and Burton Saw and Supply. The company is a provider of cutting tools, consumable supplies and tool maintenance equipment for the North American sawmill market and other wood fiber processing market segments.
“The combined company’s scale, technical capacity and global reach provide an ideal platform to benefit from long-term global trends in wood demand and process automation,” Cherry added.
“In addition, bringing the two top management teams in the industry together makes the company the acquirer of choice as consolidation of the highly fragmented industry continues and worldwide competition intensifies. We look forward to a productive collaboration with the teams on finding new avenues for growth and building on the companies’ past success.”
OEP declined to comment on financials.